<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q

(Mark One)
(X)   Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 for the quarterly period ended March 31, 2004.

( )   Transition report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 for the transition period ______ to ______.

                           Commission File No. 1-13925

                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                    38-3389456
           --------                                    ----------
(State or other jurisdiction of               (IRS Employer Identification No.)
Incorporation or organization)

            5350 Lakeview Parkway Drive South, Indianapolis, IN 46268
            ---------------------------------------------------------
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (317) 715-4196
                                 --------------
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ ]  No [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 126-2 of the Securities Exchange Act). Yes [ ] No [X]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

COMMON STOCK $0.01 PAR VALUE                       14,718,134 SHARES
----------------------------                       -----------------
  (class of common stock)                   (outstanding at August 13, 2004)

                         This report contains 31 pages.

                                       1
<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                              PAGE
<S>                                                                                                           <C>
PART I - FINANCIAL INFORMATION

         ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

                 Consolidated Balance Sheets as of March 31, 2004 and
                 December 31, 2003                                                                              3

                 Consolidated Statements of Operations for the Three Months
                 Ended March 31, 2004 and 2003                                                                  4

                 Consolidated Statement of Stockholders' Equity for the Three Months
                 Ended March 31, 2004                                                                           5

                 Consolidated Statements of Cash Flows for the Three Months Ended
                 March 31, 2004 and 2003                                                                        6

                 Notes to Consolidated Financial Statements                                                     7


         ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                                                                                               18

         ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
                 ABOUT MARKET RISKS                                                                            25

         ITEM 4. CONTROLS AND PROCEDURES                                                                       25


PART II - OTHER INFORMATION

         ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                              26

SIGNATURES

CERTIFICATIONS

EXHIBITS
</TABLE>

                                       2
<PAGE>

                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
                           CONSOLIDATED BALANCE SHEETS
                   AS OF MARCH 31, 2004 AND DECEMBER 31, 2003
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                            MARCH 31, 2004      DECEMBER 31, 2003
<S>                                                                         <C>                 <C>
ASSETS
CURRENT ASSETS:
    Cash and cash equivalents                                                  $  4,653             $  3,211
    Short-term investments                                                        6,299                7,356
     Accounts receivable (net of allowance for doubtful accounts of                 819                1,794
     $ 1,944 and $2,154 at March 31, 2004 and December 31, 2003
     respectively)
     Notes receivable (net of allowance for uncollectible notes of $250)            150                  150
     Prepaid expenses and other current assets                                      326                1,557
     Income tax refundable                                                          699                  694
                                                                               --------             --------
           Total current assets                                                  12,946               14,762

PROPERTY AND EQUIPMENT-Net                                                           70                4,985
OTHER ASSETS                                                                         --                  298
                                                                               --------             --------
TOTAL ASSETS                                                                   $ 13,016             $ 20,045
                                                                               ========             ========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Notes payable                                                             $  1,700             $  1,750
     Accounts payable                                                               761                2,000
     Accrued liabilities:
         Royalties                                                                   --                  120
         Payroll                                                                     29                   51
         Other                                                                      360                  377
     Liabilities of CART, Inc. subject to compromise (Note 11)                    2,142                5,626
                                                                               --------             --------
              Total current liabilities                                           4,992                9,924

COMMITMENTS AND CONTINGENCIES (NOTE 7)                                               --                   --

STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000,000 shares authorized, none issued
and outstanding
Common stock $.01 par value, 50,000,000 shares authorized, 14,718,134 shares        147                  147
issued and outstanding at March 31, 2004 and December 31, 2003
Additional paid-in capital                                                       87,765               87,765
Accumulated deficit                                                             (79,916)             (77,841)
Accumulated other comprehensive income                                               28                   50
                                                                               --------             --------
     Total stockholders' equity                                                   8,024               10,121
                                                                               --------             --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                     $ 13,016             $ 20,045
                                                                               ========             ========
</TABLE>

See accompanying notes to consolidated financial statements


                                       3
<PAGE>

                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
               FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
                                   (UNAUDITED)
                      (IN THOUSANDS, EXCEPT LOSS PER SHARE)

<TABLE>
<CAPTION>
                                                                 THREE MONTHS
                                                                ENDED MARCH 31,
                                                               2004         2003
                                                            --------      --------
<S>                                                         <C>           <C>
REVENUES:
 Sanction fees                                              $     --      $  3,000
 Sponsorship revenue                                              --         1,598
 Television revenue                                               --           189
 Engine lease revenue                                             --           475
 Other revenue                                                    54           902
                                                            --------      --------
      Total revenues                                              54         6,164

EXPENSES:
 Race distributions                                               --        10,993
 Race expenses                                                    --         1,567
 Race promotion expense                                           --           333
 Television expense                                               --         1,507
 Administrative and indirect expenses                          2,170         5,349
 Depreciation and amortization                                    --           820
                                                            --------      --------
      Total expenses                                           2,170        20,569

OPERATING LOSS                                                (2,116)      (14,405)
 Realized gain on sale of investments                              8            85
 Interest income                                                  33           489
                                                            --------      --------
LOSS BEFORE INCOME TAXES                                      (2,075)      (13,831)
 Income tax benefit                                               --        (4,842)
                                                            --------      --------
NET LOSS                                                    $ (2,075)     $ (8,989)
                                                            ========      ========

NET LOSS PER SHARE:
              BASIC                                         $  (0.14)     $  (0.61)
                                                            ========      ========
              DILUTED                                       $  (0.14)     $  (0.61)
                                                            ========      ========

WEIGHTED AVERAGE SHARES OUTSTANDING:
              BASIC                                           14,718        14,718
                                                            ========      ========
              DILUTED                                         14,718        14,718
                                                            ========      ========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       4

<PAGE>

                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                    FOR THE THREE MONTHS ENDED MARCH 31, 2004
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                           COMMON STOCK     ADDITIONAL               ACCUMULATED OTHER
                                         ----------------    PAID-IN    ACCUMULATED    COMPREHENSIVE   STOCKHOLDER'S   COMPREHENSIVE
                                         SHARES    AMOUNT    CAPITAL      DEFICIT      INCOME (LOSS)      EQUITY           LOSS
                                         ------    ------    -------      -------      -------------      ------           ----
<S>                                      <C>      <C>       <C>         <C>          <C>               <C>             <C>
BALANCES, JANUARY 1, 2004                14,718   $    147   $ 87,765    $(77,841)       $     50        $ 10,121
   Net loss                                  --         --         --      (2,075)             --          (2,075)      $    (2,075)
   Unrealized loss on investments            --         --         --          --             (22)            (22)              (22)
                                                                                                                        -----------
   Comprehensive loss                        --         --         --          --              --              --       $    (2,097)
                                         ------   --------   --------    --------        --------        --------       ===========
BALANCES, MARCH 31, 2004                 14,718   $    147   $ 87,765    $(79,916)       $     28        $  8,024
                                         ======   ========   ========    ========        ========        ========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       5
<PAGE>

                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                             2004        2003
                                                                             ----        ----
<S>                                                                        <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                              $ (2,075)   $ (8,989)
     Adjustments to reconcile net loss to
           net cash used in operating activities:
     Depreciation and amortization                                               --         820
     Net loss from sale of property and equipment                                --          77
     Deferred income taxes                                                       --      (4,129)
     Changes in assets and liabilities that provided by
           (used in) cash (net of effects from purchase of Raceworks, LLC):
           Accounts receivable                                                  967      (4,412)
           Prepaid expenses and other assets                                    468      (4,071)
           Income tax refundable                                                 (5)       (855)
           Accounts payable                                                  (2,061)        729
           Accrued liabilities                                                  124         917
           Deferred revenue                                                      --       7,506
                                                                           --------    --------
                   Net cash used in operating activities                     (2,582)    (12,407)

CASH FLOWS FROM INVESTING ACTIVITIES:
     Payments for purchase of Raceworks, LLC, net of cash acquired               --        (446)
     Purchase of investments                                                     --      (6,961)
     Proceeds from sale of investments                                        1,035      31,392
     Acquisition of property and equipment                                       --      (1,734)
     Proceeds from sale of property and equipment (net of cash sold)          3,039          61
                                                                           --------    --------
                Net cash provided by investing activities                     4,074      22,312

CASH FLOWS FROM FINANCING ACTIVITIES:
      Payments on notes payable                                                 (50)       (973)
                                                                           --------    --------
                Net cash used in financing activities                           (50)       (973)
                                                                           --------    --------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                     1,442       8,932
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                              3,211       6,773
                                                                           --------    --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                 $  4,653    $ 15,705
                                                                           ========    ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Cash paid during the period for:
          Income taxes                                                     $     --    $     --
                                                                           ========    ========
          Interest                                                         $     --    $     --
                                                                           ========    ========
</TABLE>

SUPPLEMENTAL  DISCLOSURES  OF  NONCASH  INVESTING  ACTIVITY - During  2004,  the
Company has negotiated  settlements with certain Raceworks,  LLC creditors which
resulted in reductions to trade account payables of approximately $546,000.

See accompanying notes to consolidated financial statements.

                                       6
<PAGE>

                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1. BASIS OF PRESENTATION AND CHAPTER 11 FILING

      BASIS OF PRESENTATION. The accompanying unaudited consolidated financial
statements have been prepared by management and, in the opinion of management,
contain all adjustments, consisting of normal recurring adjustments, necessary
to present fairly the financial position of Championship Auto Racing Teams, Inc.
and subsidiaries (the "Company") as of March 31, 2004, the results of their
operations and cash flows for the three months ended March 31, 2004 and 2003.

      The unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements included in the
Company's Form 10-K for the year ended December 31, 2003, filed with the
Securities and Exchange Commission.

      ORGANIZATION. CART, Inc., ("CART") (a Michigan corporation) was organized
as a not-for-profit corporation in 1978, with its main purpose being to promote
the sport of automobile racing, primarily open-wheel type racing cars. As of
January 1, 1992, the entity became a for-profit corporation and continued to use
the CART name.

      In December 1997, Championship Auto Racing Teams, Inc., (a Delaware
corporation) was formed to serve as a holding company for CART and its
subsidiaries (the "Reorganization"). Each outstanding share of common stock of
CART was acquired in exchange for 400,000 shares of common stock of the Company.
References to the "Company" mean Championship Auto Racing Teams, Inc. and its
subsidiaries.

      Championship Auto Racing Teams, Inc., through CART, its wholly-owned
subsidiary, owned, operated and sanctioned the open-wheel motorsports series
known in 2003 as the Bridgestone Presents the Champ Car World Series Powered By
Ford. CART was responsible for organizing, marketing and staging each of the
races in the Champ Car World Series. The Company also acted as a promoter at
certain events. The Company staged events at four different types of tracks,
including superspeedways, ovals, temporary road courses and permanent road
courses, each of which required different skills and disciplines from the
drivers and teams.

      On August 18, 2003, we publicly announced that we had received a proposal
from Open Wheel Racing Series ("Open Wheel") related to the acquisition of the
Company and that we were engaged in negotiations regarding a possible
transaction with Open Wheel.

      On August 24, 2003, we publicly announced that our board of directors had
instructed management to continue negotiating with Open Wheel with respect to
all terms related to a possible acquisition of the Company. The Company, Open
Wheel and their respective advisors continued to engage in negotiations
regarding the terms of a possible transaction and related definitive agreements.

      On September 10, 2003, representatives of the Company, Open Wheel and Open
Wheel Acquisition Corp., a wholly-owned subsidiary of Open Wheel, executed and
delivered the merger agreement and other related agreements and issued a joint
press release announcing the proposed transaction.

      On December 2, 2003, we announced that representatives of Open Wheel had
informed us that Open Wheel believed that a number of conditions of the pending
merger between the parties would not be satisfied by the time of the special
meeting of stockholders that was scheduled for December 19, 2003.

      On December 15, 2003, we announced that we had entered into an Asset
Purchase Agreement ("the Agreement") with Open Wheel. The Agreement would allow
Open Wheel to purchase the assets of CART, Inc. needed to operate the Champ Car
World Series and the stock of Pro-Motion Agency, Inc., our subsidiary that
operates the Toyota Atlantics series and CART Licensed Products, Inc., our
subsidiary that

                                       7
<PAGE>

operates our licensed merchandise function. In addition, Open Wheel would assume
from us and CART, Inc. the rights and obligations under certain promoter,
sponsor and other contracts. Open Wheel stated that it intended to continue to
operate the Champ Car World Series and the Toyota Atlantic series. The total
consideration that would be paid under the agreement was $3.0 million less $1.5
million in 2003 prize money to teams who were not affiliated with Open Wheel;
which was an obligation of CART, Inc. that would be assumed by Open Wheel. The
Agreement terminated the previously announced merger agreement that we had
entered into with Open Wheel on September 10, 2003.

      On December 16, 2003, CART, Inc. filed a petition under Chapter 11 of the
U.S. Bankruptcy Code in the United States Bankruptcy Court Southern District of
Indiana (RE CART, Inc., Case No. 03-23385-FJO-11, See Note 19).

      An Amendment by Interlineation (the "Amendment") with respect to the
Agreement was entered into on January 15, 2004 to reflect the change in
consideration and the assumption of certain claims.

      On February 13, 2004, the assets of CART, Inc, the stock of Pro-Motion
Agency, Inc. and CART Licensed Products, Inc., were sold to Open Wheel for total
cash consideration of $3.3 million, assumption of liabilities of $1.4 million in
2003 prize money to teams who were not affiliated with Open Wheel which was an
obligation of CART, Inc., forgiveness of $1.3 million in prize money due
principals of Open Wheel which was an obligation of CART, Inc. and the
assumption of certain promoter, sponsor and other contracts, pursuant to an
order of the bankruptcy court at a hearing held on January 28, 2004.

      CART, Inc. continues to operate as debtor-in-possession under the
Bankruptcy Code in order to wind up its affairs. On July 23, 2004 CART, Inc.
filed a Chapter 11 plan (the "Plan") and disclosure statement (the "Disclosure
Statement") with the bankruptcy court. The Plan provides for the distribution of
the asset sale proceeds and other currently available cash and the liquidation
and distribution of the remaining estate assets to CART, Inc.'s creditors. The
Disclosure Statement was approved by the Bankruptcy Court on August 3, 2004. The
Plan and Disclosure Statement were sent to CART Inc.'s creditors for voting; the
hearing on confirmation of the Plan will occur on September 13, 2004.

      We currently intend to liquidate our remaining assets, pay off our
remaining liabilities, and complete the process of liquidation and winding up
the Company's affairs as soon as practicable. Our Board of Directors has not
adopted a plan of liquidation and dissolution at this time, but will consider
this option when the liquidation and bankruptcy of our subsidiary CART, Inc. is
complete and after approval by our shareholders. In the event that our Board of
Directors adopts a plan of liquidation and dissolution, we would expect to incur
liquidation expenses, in addition to payments of ongoing operating expenses and
settlement of existing or potential obligations. Liquidation expenses may
include, among others, employee salaries, severance and related costs, legal and
accounting fees, as well as payments to a liquidation trustee. While we cannot
currently make a precise estimate of the expenses, we believe that a significant
portion of our current cash may be required to pay the above expenditures.

      The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed above, the Company's
intention to liquidate the remaining assets, pay off the remaining liabilities,
and complete the process of liquidation and dissolution of the Company's affairs
raise substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

      Upon completion of the sale of substantially all of our operating assets
to Open Wheel in February 2004, most of our employees resigned and accepted
employment with Open Wheel and we ceased operations.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      PRINCIPLES OF CONSOLIDATION. The consolidated financial statements of the
Company for the three months ended March 31, 2003, include the financial
statements of Championship Auto Racing Teams, Inc. and its wholly-owned
subsidiaries - CART, Inc. ("CART"), Pro-Motion Agency, Ltd. and CART Licensed
Products, Inc. As of March 7, 2003, the consolidated financial statements also
include the financial statements of Raceworks, LLC, a wholly owned subsidiary
(See Note 8). For the three months

                                       8
<PAGE>

ended March 31, 2004 the financial statements include the financial statements
of Championship Auto Racing Teams, Inc. and its wholly-owned subsidiaries -
CART, Inc. and Raceworks, LLC and through February 13, 2004, Pro-Motion Agency,
Ltd. and CART Licensed Products, Inc. All significant intercompany balances have
been eliminated in consolidation.

      BASIC AND DILUTED LOSS PER SHARE. Diluted per share amounts assume the
exercise of shares issuable under certain stock option plans when dilutive. Due
to losses from operations, no shares were included in the dilutive loss per
share calculation due to their anti-dilutive effect for the three months ended
March, 31, 2004 and 2003.

      ACCOUNTING PRONOUNCEMENTS. In January 2003, the FASB issued FASB
Interpretation No. 46 ("FIN 46") "Consolidation of Variable Interest Entities"
and during December 2003 issued Interpretation 46 ("FIN 46R") "Consolidation of
Variable Interest Entities, and Interpretation of ARB 51". The term "variable
interest" is defined in FIN 46 as "contractual, ownership or other pecuniary
interests in an entity that change with changes in the entity's net asset
value." Variable interests are investments or other interests that will absorb a
portion of an entity's expected losses if they occur or receive portions of the
entity's expected residual returns if they occur. FIN46R defers the effective
date of FIN46 for certain entities and makes several other changes to FIN46. The
Company does not expect the recognition provisions of FIN 46R to have a material
impact on the Company's financial position or results of operations.

      In March 2004, the Emerging Issues Task Force ("EITF") reached a consensus
on Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments." EITF 03-1 provides guidelines for the
evaluation and determination of whether a loss on certain investments is
other-than-temporary and requires certain additional quantitative and
qualitative disclosures pertaining to unrealized investment losses in a
company's annual financial statements. The provisions of EITF 03-1 become
effective for the Company in the third quarter 2004. The Company does not expect
that the adoption of EITF 03-1 will have a material effect on its results of
operations or financial position.

      STOCK BASED COMPENSATION. On December 31, 2002, the FASB issued SFAS No.
148, "Accounting for Stock-Based Compensation-Transition and Disclosure." This
statement amends SFAS No. 123, "Accounting for Stock-Based Compensation," to
provide alternative methods of transition for a voluntary change to the fair
value based methods of accounting for stock-based employee compensation. In
addition, this statement amends the disclosure requirements of SFAS 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results.

      As permitted by SFAS No. 123, the Company has chosen to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB No. 25") in accounting for its stock options granted to employees and
directors. Under APB No. 25, the Company does not recognize compensation expense
on the issuance of its stock options because the option terms are fixed, and the
exercise price equals the market price of the underlying stock on the grant
date.

      However, as required by SFAS No. 123, companies who have chosen to follow
APB No. 25 are required to calculate pro forma information as if it had
calculated compensation based on the fair value at the grant date for its stock
options granted to employees and directors. In the first quarters of 2004 and
2003, there was no compensation expense under APB No. 25.

                                       9
<PAGE>

<TABLE>
<CAPTION>
                                                                  Three Months Ended March 31,
                                                            (In Thousands, Except Per Share Data)
                                                                     2004         2003
                                                                  ---------    ---------
<S>                                                               <C>          <C>
NET LOSS

As reported                                                       $  (2,075)   $  (8,989)
Total stock-based employee compensation expense determined
under the fair value based method, net of tax                          (513)        (172)
                                                                  ---------    ---------
Pro forma                                                         $  (2,588)   $  (9,161)
                                                                  =========    =========

BASIC AND DILUTED LOSS PER SHARE

As reported                                                       $   (0.14)   $   (0.61)
Total stock-based employee compensation expense determined
under the fair value based method, net of tax                         (0.03)       (0.01)
                                                                  ---------    ---------
Pro forma                                                         $   (0.17)   $   (0.62)
                                                                  =========    =========
</TABLE>

      RECLASSIFICATIONS. Certain reclassifications have been made to the 2003
unaudited consolidated financial statements in order for them to conform to the
2004 presentation.

      MANAGEMENT ESTIMATES. The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period presented. The actual
outcome of the estimates could differ from the estimates made in the preparation
of the consolidated financial statements.

3. SHORT-TERM INVESTMENTS

      The following is a summary of the estimated fair value of
available-for-sale short-term investments by balance sheet classification:

<TABLE>
<CAPTION>
                                                                                     GROSS UNREALIZED
                                                                                     ----------------
(IN THOUSANDS)                                         COST        FAIR VALUE       GAIN           LOSS
                                                       ----        ----------       ----           ----
<S>                                                   <C>          <C>              <C>            <C>
MARCH 31, 2004

U.S. agencies securities                              $6,271         $6,299         $  28          $  --
                                                      ======         ======         =====          =====
DECEMBER 31, 2003

U.S. agencies securities                              $7,306         $7,356         $  50          $  --
                                                      ======         ======         =====          =====
</TABLE>

      Net proceeds from sales of investments for the three months ended March
31, 2004 and 2003 were approximately $0.10 million and $31.40 million,
respectively.

      Contractual maturities range from less than one year to two years. The
weighted average maturity of the portfolio does not exceed one year.

4. NOTES RECEIVABLE

      In June 2003, the Company entered into an amendment to a sanction
agreement with a promoter where we accepted a note in the amount of $400,000 as
payment for a portion of the sanction fee. This note is payable in 36 equal
monthly installments, bearing interest at 10% per annum, beginning January 1,
2004. The note is collateralized by all products and proceeds of all other
events staged by the promoter at the promoter's facility. We have not received
any payments on the note which were to begin on January 1, 2004. After an
assessment of the financial condition of the promoter and other considerations
it was determined the note should be written-down to managements estimate of its
fair value of $150,000 and a loss was recorded in regard to the note at December
31, 2003.

                                       10
<PAGE>

5. PROPERTY AND EQUIPMENT

         Property and equipment consisted of the following at March 31, 2004 and
December 31, 2003:

<TABLE>
<CAPTION>
                                                              (IN THOUSANDS)
                                               MARCH 31,        DECEMBER 31,                     USEFUL LIFE
                                                 2004              2003                          (IN YEARS)
                                               --------        ------------                      ----------
<S>                                            <C>             <C>                      <C>
Engines                                          $ --          $      2,273             2
Equipment                                         112                 5,251             5-20
Furniture and fixtures                             --                   248             10
Vehicles                                           --                 2,377             5-7
Other                                              --                   154             5 (except leasehold improvements)
                                                 ----          ------------
Total                                             112                10,303
Less accumulated depreciation                     (42)               (5,318)
                                                 ----          ------------
Property and equipment (net)                     $ 70          $      4,985
                                                 ====          ============
</TABLE>

      Property and equipment were written down to their fair-values as of
December 31, 2003, pursuant to an Asset Purchase Agreement entered into with
Open Wheel Racing Series, LLC. The remaining assets relate to our subsidiary
Raceworks, LLC. These items are currently idle and not currently in service.

6. SEGMENT REPORTING

      The Company had two reportable segments, sanctioning and race promotions,
which was added in 2003. There were no prior period adjustments relating to the
new reportable segment.

      Sanctioning encompasses all the business operations of organizing,
marketing and staging all of our open-wheel racing events when we acted as a
sanctioning body, as well as corporate expenses. We received a sanction fee from
the event promoter for our services that was either fixed or is based upon a
profit sharing agreement. Sanction fees revenue, sponsorship revenue, television
revenue, engine lease revenue, race distributions and race expenses, television
expenses and administrative and indirect expenses are recognized in the
sanctioning segment.

      Race promotions encompasses all the business operations of marketing and
promoting our open-wheel racing events when we acted as promoter and had
exclusive rights to the event. We received the revenues from the event and were
responsible for the expenses of the event.

      The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company's long-lived assets
were substantially used in the sanctioning segment in the United States. The
Company evaluates performance based on income loss before income taxes.

      Because we have ceased operations and intend to liquidate our remaining
assets we no longer have any race promotion activity. All significant activity
during 2004 can be characterized as corporate activity.

                                       11
<PAGE>

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED MARCH 31,
($ in thousands)                              SANCTIONING   RACE PROMOTIONS     OTHER*         TOTAL
2003                                          -----------   ---------------     ------         -----
<S>                                           <C>           <C>                <C>            <C>
Revenues                                       $  6,010          $   --        $    154       $  6,164
Interest income (net)                               486              --               3            489
Depreciation and amortization                       798              --              22            820
Segment loss before income taxes   )            (13,602)           (333)            104        (13,831)
</TABLE>

* Segment is below quantitative thresholds for presentation as a reportable
segment. These amounts are related to the Company's licensing royalties for
2003.

Reconciliations to consolidated financial statement totals are as follows:

<TABLE>
<CAPTION>
                                                DECEMBER 31,
($ in thousands)                                   2003
----------------                                 --------
<S>                                               <C>
Total assets for sanctioning segment             $ 18,925
Total assets for race promotion segment               894
Other assets                                          226
                                                 --------
Total consolidated assets                        $ 20,045
                                                 ========
</TABLE>

7. COMMITMENTS AND CONTINGENCIES

      LITIGATION. On November 4, 2003, 88 Corp. filed suit against CART, Inc. in
the United States Federal District Court for the Central District of California.
88 Corp., the promoter of the CART Champ Car World Series race at the California
Speedway in Fontana, California, claimed that the race which was to be held on
November 2, 2003 was canceled due to a "force majeure" and requested a judicial
determination as to whether or not the organizational and rights fee of $2.5
million, previously paid by 88 Corp. to CART, minus reasonable expenses incurred
by CART, should be refunded to 88 Corp. As a result of the bankruptcy of CART,
this litigation was suspended. 88 Corp. has filed a proof of claim against CART
in the bankruptcy court proceedings requesting repayment of the $2.5 million,
imposition of a constructive trust, and such other relief as the bankruptcy
court deems appropriate. CART has objected to the claim and has asserted against
88 Corp. a claim for wrongful termination of the sanction agreement as it
relates to the 2003 and 2004 races in the amount of $5.2 million. These claims
are currently pending in bankruptcy court and we are unable to make a
determination as to the likelihood of an unfavorable outcome or estimate the
amount or range of the recovery or loss.

      On December 16, 2003, CART, Inc., the Company's wholly owned subsidiary,
filed for protection under Chapter 11 of the Bankruptcy Code in the United
States Bankruptcy Court, Southern District of Indiana, Indianapolis Division.
CART, Inc.'s Chapter 11 Plan has been filed with the Bankruptcy Court. Based
upon filings by creditors of CART, Inc. , there may be claims by creditors
against CART, Inc. which could result in litigation against CART, Inc. in
Bankruptcy Court. The Company is currently unable to determine the extent of
these asserted claims and whether or not they will ultimately result in
litigation involving CART, Inc. and the Company.

      On December 12, 2003, S. R. Holdings Co., filed an action against the
Company and Raceworks, LLC, its wholly owned limited liability company, for an
alleged breach of contract to provide concession services at the Champ Car World
Series race held in Miami, Florida in 2003 and in future years. The case was
filed in the Circuit Court of Miami, Dade County, Florida. The Company filed
answer denying all allegations. Raceworks filed an answer denying all
allegations and asserted a counterclaim for breach of the agreement by S.R.
Holdings for failure to make a minimum payment to Raceworks. The Company is
unable to make a determination as to the likelihood of an unfavorable outcome or
estimate of the amount or range of possible loss.

      On August 5, 2004 the Company was served with a complaint to avoid and
recover preferential transfers filed on behalf of WorldCom, Inc. and MCI, Inc.,
in the United States Bankruptcy Court for the

                                       12
<PAGE>

Southern District of New York. The action alleges that the Company received
$1,500,000 in July of 2002 which was a payment within 90 days of the date that
WorldCom, Inc. and its subsidiaries commenced their bankruptcy by filing under
Chapter 11 of the Bankruptcy Code. The Company has not filed an answer at this
point in time and is unable to make a determination as to the likelihood of an
unfavorable outcome. The range of the possible loss is up to $1,500,000.

      As we have previously reported, we are party to several lawsuits. We
cannot predict the outcome of the litigation, and at this time, management is
unable to estimate the impact that ultimate resolution of these matters may have
on our financial position or future results of operations.

8. RACEWORKS, LLC

      On March 7, 2003, the Company acquired one hundred percent (100%) of the
membership interests in Raceworks, LLC ("Raceworks"). The results of Raceworks'
operations have been included in the consolidated financial statements since
that date. Raceworks is a motorsports promotion company that held a revocable
license agreement to annually conduct a street race in downtown Miami through
2017, with an option to extend for an additional ten (10) years. The aggregate
purchase price was $1.2 million including $473,000 of cash and a promissory note
of $722,000.

      The following table summarizes the estimated fair values, at the date of
acquisition, of the assets acquired and liabilities assumed as part of the
acquisition.

<TABLE>
<S>                                            <C>
Current assets                                 $   449,000
Property and equipment                           4,120,000
Other assets                                        36,000
Intangible assets including goodwill             1,262,000
                                               -----------
         Total assets acquired                   5,867,000
                                               -----------
Current liabilities                             (1,916,000)
Long-term debt                                  (2,778,000)
                                               -----------
         Total liabilities assumed              (4,694,000)
                                               -----------
Net assets acquired                            $ 1,173,000
                                               ===========
</TABLE>

      The acquisition was accounted for using the purchase method of accounting.
Under purchase accounting, the total purchase price has been allocated to the
tangible and intangible assets and liabilities of Raceworks based upon their
respective fair values as of the date of the acquisition. An allocation of the
purchase price has been made to major categories of assets and liabilities based
on available information.

      In December 2003, Racework's operations were discontinued and a wind-up of
business is currently under way due to CART, Inc.'s filing bankruptcy and the
subsequent sale of its assets to Open Wheel and CART, Inc.'s and Open Wheel's
decision not to continue racing in Miami.

9. LONG TERM DEBT

      In July 2002, the Company guaranteed a $1.8 million commercial term loan
in connection with the operations of Raceworks, LLC. The Company subsequently
acquired this loan in conjunction with the acquisition of Raceworks, LLC and has
recorded the loan in its long-term debt as of September 30, 2003. The principal
on the loan shall be paid quarterly, commencing on October 31, 2003 and on the
last day of each January, April, July and October thereafter, in the amount of
$50,000 per quarter.

      At December 31, 2003, the Company was in default of certain financial
covenants of the loan. These financial covenants require that total
stockholders' equity of the Company not be below $75 million. As a result, the
entire amount of the note has been classified as current.

                                       13
<PAGE>

      On May 10, 2004, The Company entered into an assignment and release
agreement that was for full and final settlement of any and all obligations
related to the loan in exchange for a cash payment from the Company of the
remaining principle balance of $1,700,000.

10. DEFERRED TAXES

      SFAS No. 109 requires that net deferred tax assets be reduced by a
valuation allowance if, based on the weight of available evidence, it is more
likely than not that some portion or all of the net deferred tax asset will not
be realized. The Company has tax assets from U.S. net operating loss
carryforwards and foreign tax credit carryforwards of $90.7 million and $0.5
million, respectively. The carryforward items expire over the next 5 to 20
years. Failure to achieve taxable income within the carryforward period would
affect the ultimate realization of the net deferred tax assets. Due to the
financial condition of the Company described in Note 1, Management does not
believe that the deferred tax assets will be realized. Consequently, the tax
benefit for current year losses and net deferred tax assets recorded at March
31, 2004 has been reduced by a $33.1 million valuation allowance.

11. CART, INC. BANKRUPTCY AND SUBSEQUENT EVENTS

CART, Inc. Bankruptcy:

      On December 16, 2003, CART, Inc., the Company's largest subsidiary that
operated the Champ Car World Series filed a voluntary petition under Chapter 11
of the U.S. Bankruptcy Code in the United States Bankruptcy Court Southern
District of Indiana (RE CART, Inc., Case No. 03-23385-FJO-11).

      In the Chapter 11 case substantially all of the liabilities as of the
filing date are subject to compromise. The following table sets forth a break
down of these liabilities:

<TABLE>
<CAPTION>
                                                  (IN THOUSANDS)
                                             MARCH 31,    DECEMBER 31,
Liabilities Subject to Compromise              2004           2003
---------------------------------              ----           ----
<S>                                        <C>            <C>
Accounts Payable                           $      1,728   $      4,848
Accrued Payroll                                     274             68
Other Accrued Payables                              140            710
                                           ------------   ------------
Total liabilities subject to compromise    $      2,142   $      5,626
                                           ============   ============
</TABLE>

      Liabilities subject to compromise have been reduced from December 31, 2003
due to the following:

      In January 2004, the bankruptcy court approved payments related to
pre-petition employee expense reimbursements and health benefits in the amount
of $28,327.

      On February 13, 2004, the assets of CART, Inc, the common stock of
Pro-Motion Agency, Inc. and CART Licensed Products, Inc., were sold to Open
Wheel for total cash consideration of $3.3 million less cash sold of $221,000.
The agreement also included Open Wheel assuming $1.4 million in 2003 prize money
to teams who were not affiliated with Open Wheel and forgiveness of $1.3 million
in prize money due principals of Open Wheel; all of the 2003 prize money was an
obligation of CART, Inc., and included in liabilities subject to compromise at
December 31, 2003. In addition, Open Wheel assumed certain promoter, sponsor and
other contracts. Prior to finalizing the sale, CART, Inc. paid pre-petition
payables in the amount of $492,000 related to the contracts assumed by Open
Wheel. The sale agreement was pursuant to an order of the bankruptcy court at a
hearing held on January 28, 2004. Other contracts assumed by Open Wheel and
settlements entered into in the first quarter of 2004, reduced liabilities
subject to compromise by $162,000 and $180,000 respectively.

      A substantial dollar amount of claims were filed that are not included in
CART, Inc.'s liabilities as of March 31, 2004. The total amount of claims filed
by potential creditors and debtor scheduled amounts with the bankruptcy court
totaled $12.2 million, excluding the inter-company liability to CART, Inc's

                                       14
<PAGE>

parent company, Championship Auto Racing Teams, Inc. of $61.6 million. The total
claims exceed the liabilities recorded on CART's balance sheet because the total
claims represent not only accounts payable to each potential creditor but also
claims for future payments, disputed amounts owed to creditors, and potential
damages for contractual breaches. The following table sets forth claims filed by
potential creditors that are not included in CART, Inc.'s liabilities as of
March 31, 2004 and December 31, 2003:

<TABLE>
<CAPTION>
          Disputed Claims Not included in Liabilities at
               March 31, 2004 and December 31, 2003                  (IN THOUSANDS)
-------------------------------------------------------------------  --------------
<S>                                                                  <C>
88-Corporation-cancellation by promoter of Fontana race                 $ 2,500
Brands Hatch Circuits, Ltd.-termination of race promotion agreement       1,150
S.R. Holdings -concession contract for Raceworks, Inc.                    1,000
Employment related contracts                                                500
IMG Motorsports-Cleveland, Inc.-Cleveland race promotion                    438
Stars of Tomorrow-Promotion agreement                                       325
Other Claims                                                                500
                                                                        -------
Total                                                                   $ 6,413
                                                                        =======
</TABLE>

      Championship Auto Racing Teams, Inc. the parent company of CART, Inc., has
entered into an agreement whereby it will subordinate its claim for the
inter-company liability to the other creditors in exchange for the agreement of
the unsecured creditors of CART releasing the Company from all claims that could
be asserted against the Company.

Bankruptcy Subsequent Events:

      CART, Inc. continues to operate as debtor-in-possession under the
Bankruptcy Code in order to wind up its affairs. On July 23, 2004 CART, Inc.
filed a Chapter 11 plan (the "Plan") and disclosure statement (the "Disclosure
Statement") with the bankruptcy court. The Plan provides for the distribution of
the asset sale proceeds and other currently available cash and the liquidation
and distribution of the remaining estate assets to CART, Inc.'s creditors. The
Disclosure Statement was approved by the Bankruptcy Court on August 3, 2004. The
Plan and Disclosure Statement were sent to CART Inc.'s creditors for voting; the
hearing on confirmation of the Plan will occur on September 13, 2004.

The following reflects unaudited balance sheet, statement of operations and
statement of cash flows information as of and for the three month period ended
March 31, 2004 for CART, Inc.:

                                       15
<PAGE>

                                   CART, INC.
                              DEBTOR IN POSSESSION
                             CONDENSED BALANCE SHEET
                              AS OF MARCH 31, 2004
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                    UNAUDITED
                                                                   ------------
<S>                                                                <C>
ASSETS:
 Current Assets
        Cash and Cash Equivalents                                  $      3,830
        Accounts Receivable                                                 780
        Current Portion of Notes Receivable                                 150
        Prepaid Expenses                                                     54
                                                                   ------------
 Total Current Assets                                                     4,814

 Total Assets                                                      $      4,814
                                                                   ============

LIABILITIES AND STOCKHOLDER'S DEFICIENCY:
 Current Liabilities
          Accounts Payable                                         $        217
          Payroll                                                            29
          Other                                                             185
 Liabilities of CART, Inc. subject to compromise                          2,142
                                                                   ------------
 Total Current Liabilities                                                2,573
 Inter-company Payable to Championship Auto Racing Teams, Inc.           61,564
                                                                   ------------
 Total Liabilities                                                       64,137

 Stockholder's Deficiency
 Common Stock                                                               102
 Additional Paid In Capital                                              15,975
 Accumulated Deficit                                                    (75,401)
                                                                   ------------
 Total Stockholder's Deficiency                                         (59,324)
                                                                   ------------
 Total Liabilities and Stockholder's Equity                        $      4,814
                                                                   ============
</TABLE>

                                   CART, INC.
                              DEBTOR IN POSSESSION
                        CONDENSED STATEMENT OF OPERATIONS
                    FOR THE THREE MONTHS ENDED MARCH 31, 2004
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                    UNAUDITED
                                                                   ------------
<S>                                                                <C>
REVENUES:
           Other revenue                                           $         35
                                                                   ------------
Total revenues                                                               35
                                                                   ------------

EXPENSES:
           Administrative and indirect expenses                           1,331
                                                                   ------------
Total expenses                                                            1,331
                                                                   ------------
OPERATING LOSS                                                           (1,296)
Interest expense                                                             (4)
                                                                   ------------
LOSS BEFORE INCOME TAXES                                                 (1,300)
                                                                   ------------
INCOME TAX EXPENSE                                                           --
NET LOSS                                                           $     (1,300)
                                                                   ============
</TABLE>

                                       16
<PAGE>

                                   CART, INC.
                              DEBTOR IN POSSESSION
                        CONDENSED STATEMENT OF CASH FLOWS
                    FOR THE THREE MONTHS ENDED MARCH 31, 2004
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                                     UNAUDITED
                                                                                   ------------
<S>                                                                                <C>
CASH FLOW FROM OPERATING ACTIVITIES:
           Net Loss                                                                $     (1,300)
           Changes in asset and liabilities that provided by (used in) cash:
                 Accounts and notes receivable                                              545
                 Prepaid expenses and other assets                                          295
                 Accounts payable                                                        (1,227)
                 Accrued liabilities                                                        702
                                                                                   ------------
Net cash used in operating activities                                                      (985)

CASH FLOWS FROM INVESTING ACTIVITIES:
           Proceeds from sale of property and equipment                                   3,260
                                                                                   ------------
Net cash provided by investing activities                                                 3,260

CASH FLOWS FROM FINANCING ACTIVITIES:
           Payments of Inter company payables                                              (425)
                                                                                   ------------
Net cash used in financing activities                                                      (425)

NET INCREASE IN CASH AND CASH EQUIVALENTS                                                 1,850
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                            1,980
                                                                                   ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                                           $      3,830
                                                                                   ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
           Cash paid during the year for:
           Income taxes                                                                      --
           Interest                                                                          --
</TABLE>

                                       17
<PAGE>

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

      Upon completion of the sale of substantially all of our operating assets
to Open Wheel in February 2004, most of our employees resigned and accepted
employment with Open Wheel and we ceased operations. We cannot list here all the
risks and uncertainties that could cause our financial results to differ
materially from our present expectations or projections regarding the estimated
distribution to shareholders, but we can identify many of them. These are set
forth in "Factors That May Affect Future Results."

      The following information is presented primarily for historical purposes
and should be read noting that the Company is no longer involved in an active
business.

CRITICAL ACCOUNTING POLICIES

Use of Estimates

      The following discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods.

      Significant accounting estimates include the allowance for doubtful
accounts for trade accounts receivable, impairment of tangible assets and
deferred race expenses, the recoverability of intangible assets and goodwill,
income taxes and related valuation allowances, certain accrued liabilities and
fair values allocated to assets acquired and liabilities assumed in business
combinations.

      We believe that the estimates, assumptions and judgments involved in the
accounting policies described below have a material impact on our financial
statements. However, as we wind down the Company, our financial position will be
based on a number of estimates which will have or may have a significant effect
on the Company's financial condition. These estimates are subject to the risks
and uncertainties we describe in this report. Actual results, therefore, could
differ from those estimated.

Litigation

      We are involved in litigation as a part of our normal course of business.
Our litigation proceedings are included in our most recent Form 10-K, Item 3:
Legal Proceedings and updated, as needed, in Part II-Other Information, Item 1:
Legal Proceedings in this and subsequent Form 10-Qs. When a complaint is filed
by or against us that represents a material claim, we disclose the proceeding in
our financial statements. When a claim against us is probable and reasonably
estimable, we record the expense. When we are the party filing the claim, we do
not record a gain contingency until any damages from the claim are assured.

RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2004

      In 2004, we plan to liquidate our remaining assets, pay off our remaining
liabilities and complete the process of liquidation and winding up the company's
affairs as soon as practicable.

      In 2004, the only revenues the Company expects to receive are from
sanctioning revenues paid to us by Open Wheel for sanctioning their races for
the 2004 season, miscellaneous revenue and interest

                                       18
<PAGE>

income from our remaining cash reserves. Sanctioning fees are $12,500 per
domestic race and it is estimated that there will be six domestic events in
2004.

      Expenses will be incurred to complete the wind up of the Company. Wind up
expenses will be incurred for salaries and benefits, severance and related
expenses, office, legal, accounting and public company expenses. CART, Inc.,
will also incur expenses related to setting up a liquidation trust and expenses
of a liquidation trustee as well as other expenses related to its Chapter 11
Bankruptcy filing.

      Total revenues were $54,000 for the three months ended March 31, 2004,
related to equipment rental and other miscellaneous revenues.

      Total expenses were $2.2 million for the three months ended March 31,
2004. Administrative expenses consisted of normal operating expenses through,
February 13, 2004, the date the "Asset Purchase Agreement" was finalized.
Expenses consisted of legal and consulting fees of $1.4 million, salaries,
employee and severance related expenses of $591,000, offices expenses of $75,000
and other miscellaneous expenses.

      Net operating loss for the quarter ended March 31, 2004 was $2.1 million.

RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2003

REVENUES

      Prior to 2004, we derived revenues primarily from (i) sanction fees, (ii)
sponsorship, (iii) television rights, (iv) race promotion, (v) engine leases and
(vi) other revenue. Following is an explanation of our individual revenue items:

      SANCTION FEES. We received sanction fees from the promoters of our races
(other than races we promote). The fees are based on contracts between the
promoters and CART. We had entered into agreements with certain promoters of the
Champ Car World Series for a reduction in the previously contracted sanction
fees. In return, we were to receive a share of the net income from the event.
The percentage of net income, if any, was also included in sanction fees.
Therefore, there was less visibility and less predictability for CART's earnings
than in the previous financial model as CART's revenues were affected by the
success of these races.

      SPONSORSHIP REVENUE. We received corporate sponsorship revenue based on
negotiated contracts. An official corporate sponsor received status and
recognition rights, event rights and/or product category exclusivity.

      We developed an Entrant Support Program for the 2003 Champ Car World
Series. The program was part of an enhanced incentive program we developed with
our teams, whereby we provided financial support to new and existing teams to
run in the Champ Car World Series and, in exchange, each team provided logo
space on its cars for Champ Car-designated sponsors to advertise. Sponsorship
fees, if any, paid by these corporate sponsors were to be retained by us to
offset the financial support we were providing to the teams. The program was to
also combine Champ Car World Series event and team sponsorship opportunities,
along with advertising on television and in print media. None of these
sponsorship packages were sold in 2003.

      TELEVISION REVENUE. In 2003, we had contracts for our domestic television
rights with CBS and Speed Channel. We broadcasted seven races on CBS and eleven
on Speed Channel. One of our races was

                                       19
<PAGE>

broadcast on HD Net TV where HD Net TV provided the air time and we shared the
cost of production. We bought the air-time and paid for production for the CBS
races. Speed Channel provided the air-time for the races aired on its network,
including Champ Car practice and qualifying and a half-hour pre-race show. We
paid for production for the races to be broadcast on the Speed Channel network.
We received the advertising inventory for all shows aired on all networks and
were responsible for selling the advertising.

      In 2003, we had international television rights with:

      -     Gold Coast Motor Events Co. (Australia)

      -     Molstar (Canada)

      -     Promotion Entertainment of Mexico, LLC (Mexico)

      -     Octagon CSI (all others)

      A rights fee were paid to us by each international broadcast partner for
rights to air the Champ Car race either live, time-delayed or as a highlight
package, in the country where they held our rights. See "Other Related Party
Transactions" for a description of our arrangements with Promotion Entertainment
of Mexico, LLC, an entity principally owned by Mr. Gerald R. Forsythe, a 23%
stockholder of the Company.

      RACE PROMOTION REVENUE. In 2003, we promoted six of our races. Race
promotion revenue included all the commercial rights associated with promoting a
Champ Car event, such as admissions, event sponsorship and hospitality sales. In
most cases we partnered with experienced race promoters to promote these events
and we were responsible for selling all of the commercial rights of the event.

      ENGINE LEASE REVENUE. In 2002, we purchased the engines that were used for
the 2003 Champ Car World Series race season. Each team was required to use these
engines in order to compete in the series. We leased the engines to the teams
for $100,000 per car.

      OTHER REVENUE. Other revenue included membership and entry fees,
contingency awards money, royalties, commissions and other miscellaneous revenue
items. Membership and entry fees were payable by Toyota Atlantic Championship
competitors. In addition, we charged fees to competitors for credentials for all
team participants and driver license fees for all drivers competing in the
series. We received royalty revenue for the use of the CART service marks and
trademarks on licensed merchandise that was sold both at tracks and at off-track
sites. We received commission income from the sale of chassis and parts to our
support series teams.

EXPENSES

      Prior to 2004, our expenses were incurred primarily in, (i) distributions
to our race teams: prize money, participation payments and team assistance, (ii)
race operations: expenses directly related to sanctioning the events, (iii) race
promotion: expenses related to races we promote, (iv) television: expenses
directly related to buying air time and production of our domestic and
international television programming and (v) administrative and indirect:
expenses related to administration, marketing, sales and public relations. Set
forth below is an explanation of the individual expense line items:

      RACE DISTRIBUTIONS. We paid the racing teams for their on-track
performance. Race distributions included the following for each event:

                                       20
<PAGE>

      -     event purse which was paid based on finishing position

      -     contingency award payments

      -     year-end point fund, which was paid based on year end finishing
            position

      -     participation payments

      -     entrant support payments

      -     team assistance

      We paid awards to the teams, based on their cumulative performance for the
season, out of the year-end point fund. Participation payments were made in 2003
to each of our entries on a per car, per race basis. In addition, entrant
support payments were made to participating teams as part of a financial
incentive plan to attract and retain teams to compete in our series. The
payments were made to teams in exchange for logo advertising space on their
cars. We had the opportunity to sell and retain the revenue from the
advertising. In 2003, we were providing assistance to certain teams to ensure
that there are a sufficient number of race cars competing in our series.

      RACE EXPENSES. We were responsible for officiating and administering all
of our events. Costs primarily included officiating fees, travel, per diem and
lodging expenses for the following officiating groups:

      -     medical services

      -     race administration

      -     race officiating and rules compliance

      -     registration

      -     safety

      -     technical inspection

      -     timing and scoring

      RACE PROMOTION EXPENSES. In 2003, we promoted six of our own events. Race
promotion expenses related to all costs associated with staging a Champ Car
event, including track rental, personnel costs and promotion of the event.

      TELEVISION EXPENSES. In 2003, we bought the air time for our seven CBS
races and a one hour preseason preview show at a cost of $3.5 million. Speed
Channel provided the air time for the races aired on its network, including
Champ Car practice and qualifying and a half-hour pre-race show. We paid for
production costs associated with the races broadcast on CBS and Speed Channel
networks. One of our races was broadcast on HD Net TV which provided the air
time and we shared the production costs. We also incurred expenses for our
international production for all of our races.

      ADMINISTRATIVE AND INDIRECT EXPENSES. Administrative and indirect expenses
included all operating costs not directly incurred for a specific event,
including:

      -     administration

      -     marketing and advertising

      -     sponsorship sales and service

      -     public relations

      For the three months ended March 31, 2003, revenues were $6.2 million.
Sanction fees were $3.0 million and were attributable to the races in St.
Petersburg, Florida and Monterrey, Mexico of $500,000

                                       21
<PAGE>

and $2.5 respectively. Sponsorship revenue and engine lease revenue are
recognized on a pro-rata basis and was $1.6 million and $475,000 respectively in
the first quarter. Television revenue for the first two races was $189,000 and
miscellaneous revenue was $902,000.

      Expenses for the three months ended March 31, 2003 were $20.6 million.
Race distributions for the first quarter were $11.0 million which consisted of
$1.3 million in purse and prize money and $9.7 million in team support and
assistance. Race operations and race promotion expenses were $1.6 million and
$333,000 respectively for the first quarter. Television expense was $1.5
million, administrative and indirect expenses were $5.3 million and depreciation
and amortization was $820,000 for the three months ended March 31, 2003.

      Operating loss for the quarter ended March 31, 2003 was $14.4 million.
Realized gain on investments for the quarter was $85,000 and interest income was
$489,000. An income tax benefit of $489,000 was recognized for the quarter. A
net loss of $9.0 million resulted due to the items discussed above for the three
months ended March 31, 2003.

LIQUIDITY AND CAPITAL RESOURCES

      We currently intend to liquidate our remaining assets, pay off our
remaining liabilities and complete the process of liquidation and winding up the
Company's affairs. Our Board of Directors has not adopted a plan of liquidation
and dissolution at this time but will consider this option when the liquidation
and bankruptcy of our subsidiary CART, Inc. is complete. In the event that our
Board of Directors adopts a plan of liquidation and dissolution, we would expect
to incur liquidation expenses, in addition to payments of ongoing operating
expenses and settlement of existing or potential obligations. Liquidation
expenses may include, among others, employee salaries, severance and related
costs, legal and accounting fees, as well as payments to a liquidation trustee.
While we cannot currently make a precise estimate of the expenses, we believe a
significant portion of our current cash may be required to pay the above
expenditures.

      Since our inception, we have funded our operations and capital
expenditures from the proceeds of our public offerings and cash generated from
operations. At March 31, 2004, we had $8.0 million in working capital, and our
primary source of liquidity was $4.7 million in cash and cash equivalents. Our
cash balance on March 31, 2004 was $4.6 million, a net increase of $1.4 million
from December 31, 2003. This increase was primarily the result of net cash from
the sale of CART, Inc.'s assets and sale of investments totaling $4.1 million.
Cash was used to pay existing liabilities and for operating expenses related to
the wind down of our business.

      Our short term investment balance on March 31, 2004 was $6.3 million, a
net decrease of $1.1 million from December 31, 2003. This decrease was primarily
due to funding our operations during the the three months ended March 31, 2004.

      CONTRACTUAL OBLIGATIONS. In April 2002, we entered into a lease for our
new corporate headquarters in Indianapolis, Indiana. The lease commenced on May
1, 2002 and expires on October 31, 2010. The total amount due through the life
of the lease as of March 31, 2004 is $2.0 million. We have sublet this office
space to Open Wheel, on substantially the same terms as our lease and retain
office space for our use, at no cost. However, we remain liable on the lease.

      In July 2002, we guaranteed a $1.8 million commercial term loan in
connection with our acquisition of Raceworks, LLC. The Company subsequently
acquired this loan in conjunction with the acquisition of Raceworks, LLC and has
recorded the loan in its long-term debt. The principal on the loan shall be paid
quarterly, starting October 31, 2003 and on the last day of each January, April,
July and October thereafter, in the amount of $50,000 per quarter. Payments of
principle and interest were paid for the October 2003 and January 2004
installments. The Company was in default of certain financial covenants of the
loan. These financial covenants require that total stockholders' equity of the
Company not be below $75 million. As a result, the entire amount of the note has
been classified as current. On May 10, 2004, the entire principal of the note
was paid according to an assignment and release entered into with the holder of
the note.

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<PAGE>

      On March 7, 2003, we acquired 100% of the equity in Raceworks, LLC. The
purchase price was $1.2 million, including $473,000 of cash and a contingent
promissory note of $722,000, without interest, and assumption of liabilities of
$4.7 million. On December 8, 2003, the company entered into a release and
settlement agreement, with the sellers of Raceworks, that released both parties
from any future obligations under the acquisition agreement in exchange for
payment of $361,250 in cash to the sellers. In December of 2003, after the
merger agreement with OWRS was terminated, as discussed above, it was determined
that OWRS had no interest in the assets of Raceworks, LLC or continuing to race
in the city of Miami. The Company recognized an impairment charge of $5.1
million to write-off the goodwill and long lived assets of Raceworks, LLC.

FACTORS THAT MAY AFFECT FUTURE RESULTS

WE CANNOT ASSURE YOU OF THE AMOUNT, IF ANY, OF ANY DISTRIBUTION TO OUR
STOCKHOLDERS UNDER A PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION.

      Liquidation and dissolution may not create value to our stockholders or
result in any remaining capital for distribution to our stockholders. We cannot
assure you of the precise nature and amount of any distribution to our
stockholders pursuant to a plan of distribution. Uncertainties as to the precise
net value of our non-cash assets and the ultimate amount of our liabilities make
it impracticable to predict the aggregate net value, if any, ultimately
distributable to our stockholders. The actual nature and amount of all
distributions will depend in part upon our ability to settle our liabilities or
potential liabilities. We may not be successful in doing so to return a
meaningful amount of cash to our stockholders.

WE MAY NOT BE ABLE TO SETTLE ALL OF OUR OBLIGATIONS TO CREDITORS.

      We have current and future obligations to creditors. These include,
without limitation, long-term contractual obligations. As part of the wind down
process, we will attempt to settle our obligations with our creditors. We may
not, however, succeed in doing so. If we cannot reach an agreement with a
creditor concerning an obligation, that creditors may choose to bring a lawsuit
against us. Any litigation could delay or even prevent us from completing the
plan of dissolution. Moreover, amounts required to settle our obligations to
creditors will reduce the amount of remaining capital available for
distributions to stockholders.

WE WILL CONTINUE TO INCUR CLAIMS, LIABILITIES AND EXPENSES WHICH WILL REDUCE THE
AMOUNT AVAILABLE FOR DISTRIBUTION TO STOCKHOLDERS.

      Claims, liabilities and expenses from operations (such as operating costs,
salaries, directors' and officers' insurance, payroll and local taxes, legal,
accounting and consulting fees and miscellaneous office expenses) will continue
to be incurred as we wind down. These expenses will reduce the amount of assets
available for ultimate distribution to stockholders. If available cash is not
adequate to provide for our obligations, liabilities, expenses and claims, we
may not be able to distribute meaningful cash, or any cash at all, to our
stockholders.

DISTRIBUTION OF ASSETS, IF ANY, TO OUR STOCKHOLDERS COULD BE DELAYED.

      Our Board of Directors has not established a firm timetable for proposing
to our stockholders a plan of liquidation, nor can we assure approval of such a
plan or the amount of any distributions to our stockholders. We are currently
unable to predict the precise timing of any distribution, if any, pursuant to
our wind down. The timing of distribution, if any, will depend on and could be
delayed by, among other things, the timing of claim settlements with creditors
and potential litigation. Additionally, a creditor could seek an injunction
against the making of distributions to our stockholders on the ground that the
amounts to be distributed were needed to provide for the payment of our
liabilities and expenses. Additionally, we could seek protection from creditors
under the federal bankruptcy code. Any action of this type could delay or
substantially diminish, or eliminate, the amount available for distribution to
our stockholders.

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<PAGE>

IF WE FAIL TO CREATE AN ADEQUATE CONTINGENCY RESERVE FOR PAYMENT OF OUR EXPENSES
AND LIABILITIES, OUR STOCKHOLDERS COULD BE HELD LIABLE FOR PAYMENT TO OUR
CREDITORS OF EACH SUCH STOCKHOLDER'S PRO RATA SHARE OF AMOUNTS OWED TO THE
CREDITORS IN EXCESS OF THE CONTINGENCY RESERVE, UP TO THE AMOUNT ACTUALLY
DISTRIBUTED TO SUCH STOCKHOLDER.

      If a plan of dissolution is proposed to and ratified and approved by our
stockholders, we will file a Certificate of Dissolution with the State of
Delaware dissolving the Company. Pursuant to the Delaware General Corporation
Law, we will continue to exist for three years after the dissolution becomes
effective or for such longer period as the Delaware Court of Chancery shall
direct, for the purpose of prosecuting and defending suits against us and
enabling us gradually to close our business, to dispose of our property, to
discharge our liabilities and to distribute to our stockholders any remaining
assets. Under the Delaware General Corporation Law, in the event we fail to
create an adequate contingency reserve for payment of our expenses and
liabilities during this three-year period, each stockholder could be held liable
for payment to our creditors of such stockholder's pro rata share of amounts
owed to creditors in excess of the contingency reserve, up to the amount
actually distributed to such stockholder.

      However, the liability of any stockholder would be limited to the amounts
previously received by such stockholder from us (and from any liquidating trust
or trusts) in the dissolution. Accordingly, in such event a stockholder could be
required to return all distributions previously made to such stockholder. In
such event, a stockholder could receive nothing from us under the plan of
dissolution. Moreover, in the event a stockholder has paid taxes on amounts
previously received, a repayment of all or a portion of such amount could result
in a stockholder incurring a net tax cost if the stockholder's repayment of an
amount previously distributed does not cause a commensurate reduction in taxes
payable. There can be no assurance that the contingency reserve established by
us will be adequate to cover any expenses and liabilities.

WE DO NOT EXPECT TO RECOGNIZE ANY MATERIAL REVENUE IN THE FUTURE

      We do not expect to recognize much, if any, additional revenue.
Furthermore, it may be difficult to collect receivables now that we have
announced our intent to wind down.

WE WILL CONTINUE TO INCUR THE EXPENSES OF COMPLYING WITH PUBLIC COMPANY
REPORTING REQUIREMENTS.

      We have an obligation to continue to comply with the applicable reporting
requirements of the Securities Exchange Act of 1934, as amended, referred to as
the "Exchange Act," even though compliance with such reporting requirements is
economically burdensome.

RELATED PARTY TRANSACTIONS

      We have historically entered into transactions with related parties,
because several of our directors and one of our significant stockholders are
team owners. We believe that all the transactions which we have entered into
with our directors or significant stockholders have terms that are comparable to
the terms that we could have entered into with unaffiliated third parties with
respect to each of these transactions. In order to avoid conflicts of interest,
any of our directors who was affiliated with an entity that was entering into a
transaction with us would not vote on any matters related to such transactions
and may have, in certain circumstances, refrained from participating in any
discussions related to such transactions.

      Gerald R. Forsythe, a 22.9% stockholder of the Company, is one of the
principal members of Open Wheel which purchased the assets of CART, Inc.
pursuant to an Asset Purchase Agreement, entered into in February 2004. The
consideration paid to CART, Inc., for the purchase of the assets, along with the
stock of Promotion Agency, Ltd. and CART Licensed Products, Inc. was total
consideration of $3.3 million in cash, the assumption by the buyer of $1.4
million in prize money owed to teams not affiliated with the principals of Open
Wheel, forgiveness of $1.3 million in prize money due teams affiliated with
principals of Open

                                       24
<PAGE>

Wheel, including Mr. Forsythe and the assumption of certain promoter,
sponsorship, and other contracts. The agreement was approved by the order of the
bankruptcy court at a hearing on January 28, 2004.

      In 2004, the Company is sanctioning the races for Open Wheel. The Company
receives $12,500 for each domestic race it sanctions and is reimbursed for
various expenses it incurs in sanctioning the events.

      We have also sub-leased our Indianapolis office and warehouse to Open
Wheel for substantially the same terms as our lease, we remain obligated on the
lease which runs through 2010.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

      With the exception of historical information contained in this Form 10-Q,
certain matters discussed are forward-looking statements. These forward-looking
statements involve risks that could cause the actual results and plans for the
future to differ from these forward-looking statements. The factors listed
below, among others, could cause the forward-looking statements to differ from
actual results and plans:

      Additional information concerning factors that could cause actual results
to differ materially from those in the forward-looking statements is contained
in the Company's SEC filings made from time to time, including, but not limited
to, the Form 10-K for the year ended December 31, 2003. Copies of those filings
are available from the Company and at the SEC's website www.sec.gov. The Company
undertakes no obligation to update publicly any forward-looking statements as a
result of new information, future events, or otherwise.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

      INTEREST RATE RISK. Our investment policy was designed to maximize safety
and liquidity while maximizing yield within those constraints. At March 31,
2004, our investments consisted of U.S. Agency issues, letters of credit, and
money market funds. The weighted average maturity of our portfolio is 135 days.
Because of the relatively short-term nature of our investments, our interest
rate risk is not considered significant.

ITEM 4.: CONTROLS AND PROCEDURES

      (a) As of March 31, 2004 we carried out an evaluation, under the
      supervision and with the participation of our Chief Executive Officer and
      Chief Financial Officer, of the effectiveness of the design and operation
      of our disclosure controls and procedures pursuant to Exchange Act Rule
      13a-14. Based upon that evaluation, our Chief Executive Officer and Chief
      Financial Officer concluded that our disclosure controls and procedures
      are effective in timely alerting them to material information relating to
      us (including our consolidated subsidiaries) required to be included in
      our periodic SEC filings.

      (b) Upon completion of the sale of substantially all of our operating
      assets to Open Wheel in February 2004, most of our employees resigned and
      accepted employment with Open Wheel and we ceased operations. We are in
      the process of winding up the affairs of the Company. We currently have
      two employees the Chief Executive Officer and Chief Financial Officer and
      we also use temporary accounting help in winding up the Companies affairs.
      Subsequently, we have had a reduction in our accounting staff. We have
      reviewed and revised our internal controls due to the reduction in staff
      and change in operations and believe we have effective internal controls
      and proper approval and authorization processes in place.

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<PAGE>

                      CHAMPIONSHIP AUTO RACING TEAMS, INC.

                           PART II - OTHER INFORMATION

Item 6.     Exhibits and Reports on Form 8-K.

            (a) Exhibits.

                  31.1  Form 10-Q Certification by Christopher R. Pook, Chief
                        Executive Officer dated as of August 24, 2004.

                  31.2  Form 10-Q Certification by Thomas L. Carter, Chief
                        Financial Officer dated as of August 24, 2004.

                  32.1  Section 906 Certification by Christopher R. Pook, Chief
                        Executive Officer dated as of August 24, 2004.

                  32.2  Section 906 Certification by Thomas L. Carter, Chief
                        Financial Officer dated as of August 24 , 2004.

            (b) Reports on Form 8-K.

                  1)    On January 20, 2004, the Company filed a Form 8-K,
                        pursuant to Item 5 of such form, reporting that we
                        issued a Press Release announcing the filing of an
                        amendment to the Asset Purchase Agreement, which was
                        entered into between the Company and Open Wheel Racing
                        Series on December 15, 2003.

                  2)    On April 14, 2004, the Company filed a Form 8-K,
                        pursuant to Item 5 of such form, reporting that we
                        issued a Press Release announcing that the Company could
                        not file its Form 10-K fiscal year ended December 31,
                        2004 on a timely basis.

                  3)    On May 14, 2004, the Company filed a Form 8-K, pursuant
                        to Item 5 of such form, reporting that we issued a Press
                        Release announcing that the Company could not complete
                        the filing of its Form 10-Q for the quarter ended March
                        31, 2004.

                  4)    On August 17, 2004, the Company filed a Form 8-K,
                        pursuant to Item 5 of such form, reporting that we
                        issued a Press Release announcing that the Company could
                        not complete the filing of its Form 10-Q for the quarter
                        ended June 30, 2004.

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                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                        CHAMPIONSHIP AUTO RACING TEAMS, INC.

Date: August 24, 2004                   By: /s/  Thomas L. Carter
                                           -------------------------------------
                                           Thomas L. Carter
                                           Chief Financial Officer

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